Obama Targets ‘Broken Tax System’: Calls for End to Outsourcing and Loopholes

By Huma Khan
@humaik
Follow on Twitter

ABC News’ Sunlen Miller reports: President Obama announced this morning steps to deal with “the most egregious examples” of problems in the country’s tax code, and to crack down on Americans who are “bending or breaking the rules.” Touting a plan which aims to save American taxpayers $210 billion over the next ten years, the president, flanked by Treasury Secretary Tim Geithner and Internal Revenue Service Commissioner Doug Shulman, outlined how he will strengthen the tax code to end abuses. “Nobody likes paying taxes, particularly in times of economic stress,” The president said in the Grand Foyer of the White House. “But most Americans meet their responsibilities because they understand that it’s an obligation of citizenship, necessary to pay the costs of our common defense and our mutual well-being. And yet, even as most American citizens and businesses meet these responsibilities, there are others who are shirking theirs. And many are aided and abetted by a broken tax system, written by well-connected lobbyists on behalf of well-heeled interests and individuals.” The administration’s two-part plan targets not only that "broken tax system" as a whole, but specifically the well-connected who are benefiting from loopholes in the system, and aims to make it more profitable for companies to create jobs in the U.S. The president called for the making good of his campaign promise to end the practice of rewarding companies who ship jobs overseas or transfer profits to overseas tax havens. “The way we make our businesses competitive is not to reward American companies operating overseas with a roughly 2 percent tax rate on foreign profit, a rate that costs taxpayers tens of billions of dollars a year. The way to make American businesses competitive is not to let some citizens and businesses dodge their responsibility, while ordinary Americans pick up the slack,” he said. The president said the budget, which the administration will release in more detail this week, will finally give tax breaks to companies that create jobs in the U.S, which will create savings to be invested back into the country. “We will stop letting American companies that create jobs overseas take deductions on their expenses when they do not pay any American taxes on their profits, and we will use the savings to give tax cuts to companies that are investing in research and development here at home so that we can jumpstart job creation, foster innovation and enhance America’s competitiveness.” The president called for shutting down of overseas tax havens that let companies set up operations to avoid paying taxes in America — which he called a “tax scam” that needs to come to an end. “That’s why we’re closing one of our biggest tax loopholes. It’s a loophole that lets subsidiaries of some of our largest companies tell the IRS that they’re paying taxes abroad, tell foreign governments that they’re paying taxes elsewhere, and avoid paying taxes anywhere.” Obama — working with the Treasury Department and the IRS — called on Congress to pass some “common-sense measures” to ward against these “tax cheats.” “One of these measures would let the IRS know how much income Americans are generating in overseas accounts by requiring overseas banks to provide 1099s for their American clients, just like Americans have to do for their bank accounts here in this country. If financial institutions won’t cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly.” The president announced that he is seeking to hire nearly 800 more IRS agents to detect and pursue American tax evaders abroad. — Sunlen Miller